What is the primary characteristic of a freemium business model?

The primary characteristic of a freemium business model is that it offers a product or service to users for free, while also promoting a related premium product or service that users can upgrade to if they desire additional features, functionalities, or enhancements. This model works by attracting a large user base with the free offering and converting a portion of those users to paying customers for the premium features. The key aspect of the model is the balance between the free service, which provides enough value to users, and the premium service, which fulfills additional needs or offers enhanced experiences to those willing to pay.

This model is commonly seen in software and online services, where basic features may be offered for free, while advanced functionalities are reserved for paid subscriptions. By providing a no-cost entry point, businesses can effectively showcase their value, build a loyal customer base, and ultimately drive revenue through the premium offerings.